Senator Smith’s mathematical MTA folly

When New York State Senate Majority Leader Malcolm Smith introduced his version of the MTA rescue package this week, the resulting condemnation was swift and universal. None of the major players — Richard Ravitch, Sheldon Silver, David Paterson, Michael Bloomberg — felt that the Senate’s temporary fix did anything to address the long-term issues plaguing the MTA or the need to fund its capital campaign.

While some critics on Tuesday questioned the numbers behind Smith’s plan, little did anyone realize just how terribly inaccurate and inappropriate his plan would turn out to be. In The Times today, William Neuman goes behind the numbers to reveal that the Senate plan is based on poor assumptions, incorrect calculations and just plain old errors. What’s worse is Smith’s camp trying to blame the MTA for their sloppy mistakes. This is a New York political folly of epic proportions.

Allow me to quote at length from Neuman’s article for full effect:

As an alternative [to Richard Ravitch’s tax-and-toll plan], the [Senate Democrats] propose imposing a smaller payroll tax than the one in Mr. Ravitch’s plan and increasing fare revenues by 4 percent. Mr. Smith says that his plan would provide the authority enough money to operate through next year and buy time for a longer-term solution.

But aides to the governor say that the Senate plan contains at least two basic errors — and a review of the data backs up their critique: the Senate plan overstates the amount of money it would raise over the next two years by more than $700 million. The governor’s office said that to make up for the shortfall, the Senate would have to increase fare revenues by a total of 13 percent.

Marc Shaw, a senior adviser to the governor, said the Senate plan miscalculated the amount of payroll tax that could be collected this year, overstating the amount by about $300 million. The reason is based in the way the state collects taxes and the way the authority does its bookkeeping. The Senate plan assumes that a full year’s worth of tax receipts would pour into the authority’s coffers this year.

But Mr. Shaw said that because the tax, like other similar taxes, is collected quarterly (in part this is meant to make it easier for employers), money from the final three months of this year would not reach the authority until January 2010. That means that the authority, which uses what is known as a cash method of accounting, cannot show the final quarter’s tax revenues on this year’s books.

The Senate plan gets that wrong, projecting four quarters of tax receipts this year.

So the Senate — the same Senate that has criticized the MTA for not offering up a full audit — doesn’t even know how the MTA records revenue or how tax collection in New York works? Who are these fools in Albany? If Marc Shaw, an adviser to Paterson and potential heir to Elliot Sander’s CEO-ship, knows this information, so should Malcolm Smith.

The problems, according to Neuman, continue:

Under the Ravitch plan, the authority would use hundreds of millions of dollars from the payroll tax to finance bus costs that had previously been paid for by New York City and the surrounding counties.

The Senate plan eliminates that provision. But in its proposal, it makes a mistake in accounting for those bus costs. Instead of simply removing them from the transportation authority’s balance sheet, it turned them into income. The mistake adds up to $409 million over the two years of the Senate plan.

Initially, Senate officials denied that they had made any mistakes in their calculations. But subsequently they blamed the authority for the errors. “The blatantly ambiguous manner in which they categorized their numbers clouded the picture of their finances,” said Austin Shafran, a spokesman for Mr. Smith. “If the math was wrong,” he said, “it was wrong based on the way they gave us the numbers.”

But Mr. Shafran said that Senate staff members had not checked their numbers with the authority or sought clarification.

Meanwhile, as Neuman notes, Smith has been questioning why the MTA is going to raise its fares 23 percent next week while under the Ravtich plan, the agency would enact just an 8 percent fare increase. Apparently, our State Senate Majority Leader is too daft to realize that under the Ravitch plan, the MTA would also enjoy dedicated revenue streams from taxes and tolls.

This isn’t rocket science. While your average New Yorker may not understand the MTA’s financial troubles, the State Senate is paid to do so. If I can comprehend these difficulties, if David Paterson’s advisers, Richard Ravitch’s team, the MTA Board and Michael Bloomberg can, then so could a bunch of people who have taken it upon themselves to fix the problem. The State Senators, however, would rather grandstand on the issue than bother to check their work against that of the MTA. How utterly sad for the state of New York.

In the end, of course, this gives me no confidence that an MTA rescue package will be approved before Wednesday. The Ravitch Plan is dead, and with it will go decent subway service in New York City for the foreseeable future.